It surprises me see the lack of interest people have when it comes to their mortgage, especially when it comes to how mortgage penalties are calculated. Part of the problem is that the person who set up the mortgage to begin with didn’t think it was important. They don’t take the time because they will most likely never see that person again or they don’t care because when the client comes into the bank furious, it won’t be their problem.
It’s not the banks problem. And that is where the problem lies. Lack of accountability.
A $400,000 mortgage taken 2 years ago has an interest rate differential penalty of almost $24,000. Is this not important? Was it not important to discuss the possibility of this occurring? As a trusted advisor, is it not your responsibility to go over all possible outcomes and situations that might arise?
Even though it is the responsibility of the mortgage professional, clients also have to be pro-active when it comes to informing themselves on these types of things. The problem is that clients have no idea about the penalty until it’s too late. There are other options if you do choose to go with a fixed rate mortgage. There are non bank lenders with lower rates and more options. These lenders do not calculate their penalties that same way and customer service is second to none. These lenders only deal with the mortgage broker channel and we have great relationships with them.
If you are faced with a situation in which you are going to discharge your mortgage and they have calculated a very high discharge penalty, there are ways to bring that penalty down prior to closing. Give us a call for more details.